Borse Dubai Benefits from Bull Run in UK Equities as It Divests London Stock Exchange Stake

Borse Dubai, an entity under the Investment Corporation of Dubai, a sovereign wealth fund takes advantage of rising stock prices

index_01The London Stock Exchange’s single largest investor, UAE-based Borse Dubai, which had a 17% stake in the firm,  reduced its stake in the historic trading venue earlier this week, the sale coming on the back of a positive rally in global equities.

The sale was confirmed by the Borse in a statement and came 8 years after the government-owned exchange invested in the UK.

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The investment was the first major move by the government into the UK’s premier financial services sector and has sparked further investment into Nasdaq OMX. Details of the sale were announced in a statement in which the firm reported that it had sold its stake with the international banks mediating the transaction, including BofA Merrill Lynch, Barclays and Nomura. The LSE saw its share price dive, hitting an intra-day low of 9% after the news was reported.

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Borse Dubai was unavailable for comment, however, the firm stated to Reuters that it was the “appropriate time to monetise” its investment, and the  proceeds from the stake sale would be used for “general business purposes.”

H.H. Sheikh Mohammed bin Rashid Al Maktoum  Chairman of Investment Corporation of Dubai
H.H. Sheikh Mohammed bin Rashid Al Maktoum,
Chairman of Investment Corporation of Dubai

Over the eight year investment period, the UAE has cooperated with the UK-based venue to promote domestic products. In 2013 the country’s leading real estate development company, Damac Properties, filed for listing in the UK as a Global Depository Receipt (GDR). The shares were priced at $12.25 per unit with the filing raising over $400 million in investor interest.

The LSE has been extending its footprint to cover global markets, this week the firm listed the first RMB-denominated Money Market ETF, thus reinforcing its position as a premier destination for offshore Asian investment.

The UAE-UK relationship has been prominent in the world of financial services. The DFSA, a special economic zone was created in 2004 by the government as a marketplace for international providers, banks and brokers, to do business in the region. The DFSA, a regulatory authority, mirrors its guidelines on the UK’s FSA (now FCA). The authority has been a hotspot for margin FX brokers as it allows firms to offer FX under a well governed system. The DFSA noted that it was planning to extend its oversight of margin products as it plans to enter the retail space.

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